Ever noticed on the sides of coins how there's a textured reeding?
For the longest time I thought that this was to help people who were vision impaired be able to tell which coins where which. Though this seemed sensible at the time it seems I was entirely incorrect as to the reason why coins have this feature.
If you go back far enough you'll notice a few things, firstly coins tended to be made of precious metals and secondly the edges of the coins tended to be flat. After all the minting process is easier if you don't have to reed the edges. This is especially so if the coins are minted with the old hand hammered technique that was used in antiquity.
There's a significant problem with these flat edges however, and it's not accessability concerns that drove the change. It enables a scam where people can carefully shave down the edges of the coins. What this does is allows the scammer to start collecting the precious metal content of the coins, but not so much that they are detected when they attempt to spend the coins they have just shaved down. By turning over a lot of coins they can amass some of the precious metal content without paying for it.
This became an increasingly big problem as more people started to recognize the scam, so in 1696 the British government realized it had to do something. At the same time counterfeiting was getting rampant due to simple designs and estimated were that 10% of the total coinage was counterfeit at the time, many other coins were shaved and sometimes coins were both. This lead to the events of the Great Recoinage of 1696 where all the old hammered currency was to be exchanged for newly minted coins. So they ended up calling upon Issac Newton -- yes the same Newton known for his calculus work -- to help deal with the problem. The outcome of this was that the newer coins incorporated reeding on the edges so that any tampering with the coins via simple shaving of the edges would be instantly recognizable. Old coins were exchanged with the new not by their face value but by weight.
These events weren't profitable for the government and were one of the factors that led to a gold standard being introduced. With a gold standard the currency has convertibility to gold at some predefined rates, but crucially in order to make this work the value of the coins themselves must be lower than what they can be redeemed for, more about that later. The gold standard marked a large economic event, one with reaching impacts to this very day, if not because of widespread implementation but because of the philosophy and challenges it represented.
So how did I come to find out about this, I was watching a video about coin collecting deals being made and someone made a comment about the reeding on the sides of a coin being a factor in telling apart the different coins. At least with some of the older USA coinage you had some denominations that had a different number of reeds on the side of the coin based on the mint that the coins were struck at. So much for my theory that they came about to help people who were struggling with eyesight. In later times the reeding and dimensions got completely standardized at which point I'm sure the coins were easier to determine by feel.
But also interesting is that the lower denomination coins had no reeding on the side because they were made of less valuable metals. But what an interesting effect inflation has, the old 1cent USA coin was the bronze composition of 95% copper 2.5% tin and 2.5% zinc, which is why these coins are called bronze coins. But these days the copper metal content of those coins would be far higher value than the face value of the coin so you don't see "bronze coins" made out of bronze anymore. Ironically the higher value of the bronze content of the coins sets up the same circumstances by which scammers could shave the edges of the coins to profit like in centuries gone by. But in the case of copper it turns out to be more valuable to just melt the coins down for the value of the metal contained within them due to the face value being low. These issues with the metal value in the coins first surfaced in world war 2 where the value of the metal was far higher when allocated to the war effort which led to the 1943 steel cent being created. The metal freed up was then used in the war effort, enough to make "two cruisers, two destroyers, 1,243 Flying Fortresses, 120 field guns and 120 howitzers"1. After the war there was less a need for those metals and a LOT of spent shell casings, in 1944–1946 many coins were made using the metal from spent shell casings from the war. I knew about these differences in the metal content of the coins from my time working in the vending industry, I just didn't know why the changes were made to the coins in the first place at the time. For a coin mechanism machine to function you have to deal with the various weights, sizes and metal compositions of the coins in order to detect what coins have been inserted and to reject counterfeits. Every time the mint changes a coin all these machines need to be reprogrammed, this turned out to be a massive hassle in Canada when they changed the metal composition of their $1 and $2 coins in 2012, locally referred to as "loonies" and "toonies" respectively2.
Fast forward and many countries dropped the gold standard, which meant that the value of the currency vs metals could fluctuate substantially more. It also started to create a situation where the metals in the coins could get a lot more valuable that the face value of the coins of the lower denominations. This led to the change in 1982 where the USA 1 cent piece was 97.5% zinc and 2.5% copper, since zinc was the cheaper element at the time (also TIL this is why it's dangerous if you or your pets swallow a new design 1cent piece because zinc in large quantities is toxic).
Fast forward a few more decades and inflation has run yet another course and metals have got more expensive. This has led to a situation in which the metal content of the coins is more than the face value for the lowest denomination coins. Each 1 cent coin costs more in metal to mint than 1 cent and has done for many years now. In anticipation of this laws have been introduced that make melting down coinage illegal. You have also had countries start removing the lowest denomination coins, for example Canada discontinued the 1cent coin in 2012 at the same time they redesigned the $1 and $2 coins. Australia dropped the 1 cent and 2 cent coins denominations far earlier in 1992, many of these coins eventually got melted down to make the bronze metals for the Sydney olympics.
So you see these weird things like the US federal reserve losing many millions of dollars a year making 1 cent coins. But things have once again reached another tipping point with the events of the 2020 pandemic disrupting the supply chains of the world. This has led to a situation where minting and distributing the coinage has got more expensive. This has led to a situation whereby shortages of coins have started to be seen in some places, with some pundits saying The Latest Pandemic Shortage: Coins Are The New Toilet Paper. If you'd read my post about the toilet paper panic of 2020 you'd recognize the impact that supply chain disruptions can have on the availability of items that would usually be easy to find. But as you can see there's a pretty significant difference between toilet paper and coinage in the sense that you don't have an option to melt down toilet paper for it's valuable paper fibre content (at least yet!).
In times gone past reducing the precious metals was a method for debasing a currency, this was especially obvious with the late stages of the Roman Empire and perhaps was a contributing cause for the collapse when successive emperors reduced the amount of precious metal in the coins. Reducing the value of the metals in coins sure does sound familiar. Except these days it doesn't really matter as much because in this modern age most money exists only as entries in databases of various forms (and yes this includes cryptocurrencies that use distributed ledgers). So with the combined issues of coinage that has metal worth more than the face value and growing supply chain expenses in creating and distributing coinage it seems like we might just see coins go away in the future rather than see a continuation of the trend of coins getting their metallic compositions changed.
Changing the arrangements of some bits in a database is a far easier way to debase a currency than to change the physical dimensions or compositions of a large amount of physical currency. It also has the benefit to policy makers that because the process is sufficiently opaque the populace might not as readily realize the value of their currency is changing and put up a fight against such policies. Or maybe not...
Numbers about military production enabled by the shift in coinage is from this reference: https://www.treasury.gov/about/education/Pages/lincoln-cent.aspx ↩
The Canadian $1 coin has a picture of common loon on it, hence the nickname of the Loonie where the denomination of the coin is . The $2 coin was introduced later and is referred to as a "Toonie" in reference to the loonie and the fact that the coin is two dollars. ↩